Finance | Extent to which house building inflation is manageable
To ask the Minister for Finance the extent to which he regards house building inflation to be manageable with particular reference to the cost to young families; and if he will make a statement on the matter.
According to the Central Statistics Office (CSO) Wholesale Price Index, the wholesale price of building and construction materials (excluding VAT) increased by 18.2 per cent in the 12 months to April 2022. Some key construction materials have experienced very high levels of inflation, including, 28.5 per cent for rough timber, 51.3 per cent for structural steel and reinforcing metal and 21 per cent for plaster.
Many of the factors explaining the current high inflationary environment are not within Ireland’s control. These include the inflationary impact — via energy prices — of Russia’s unprovoked invasion of Ukraine; the impact of a rapid rebound in global demand post-pandemic; and blockages in global supply chains affecting the availability of key inputs.
These events will clearly have an impact of the price of new homes coming onto the market. However, it is important to note that inflation in the price of second hand homes is currently higher than inflation in new homes. The CSO’s Residential Property Price Index shows that from Q1 2021 to Q1 2022, the price of new homes increased by 6.2 per cent and the price of second hand homes increased by 17.8 per cent. This indicates that the mismatch between demand and supply is the primary driver of residential property price inflation, not the rising cost of input prices.
As a result, the Government’s primary response to mitigate residential price inflation has been to increase supply. Under Housing for All, the target is to build 33,000 new homes on average per annum to 2030. In the twelve months to April 2022, 32,456 new homes were commenced. Moreover, in the 12 months to end Q1 2022, there were 44,491 units granted planning permissions nationally.
As well as increasing the supply of homes in general, more work needs to be done to increase the supply of social and affordable homes. In Budget 2022, €4 billion was allocated towards housing, including capital funding of €2.58 billion, a large proportion of which will be used to deliver 9,200 new social homes. Under Housing for All, there is a commitment to invest over €4 billion in housing per year to 2030.
Housing for All targets the delivery of over 90,000 social homes, 54,000 affordable homes for purchase or rent, 18,000 cost rental homes and 170,000 private homes by 2030. Achieving these targets will make a real difference in improving affordability for our citizens, including young families.
Young families can also avail of supports such as the Help to Buy scheme, which provides a refund of income tax and deposit interest retention tax, and the Local Authority Home Loan.
All of these measures demonstrate the need to take a multi-faceted approach to increase the supply of new housing.
Leave a Reply